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Informist, Friday, Jun. 6, 2025

--RBI Malhotra: No change in near future in norms on FII investment in banks 

--RBI Malhotra: No timeline on OK small banks conversion to universal banks 

--RBI Swaminathan: Saw shrinkage of MFI portfolio due to recaliberation 

--RBI Malhotra: Common man trusts banks with his money, this is necessary 

MUMBAI – Reserve Bank of India Governor Sanjay Malhotra Friday ruled out any immediate change in investment limits for foreign institutional investors. Speaking at the post-policy press conference following the second bi-monthly monetary policy for 2025-26 (Apr–Mar), Malhotra said the central bank was not considering increasing the investment limit for FIIs at this stage. "The limit is already there. We are not planning any changes anytime soon," Malhotra said.

However, he added that the central bank was reviewing the ownership structure and eligibility criteria for foreign investors, including non-residents. "These are deeper questions. We will have to think through them, keeping in mind what is correct for the overall economy," he said, adding that the process will take time.

Malhotra also stressed the importance of trust in the banking system. "Every common man trusts banks with their money, and we have to retain that trust. For that, we need trustworthy management in banks," he said. When asked about licensing of small finance banks, Malhotra clarified that the RBI was not operating on a fixed timeline. "That doesn't mean we don't have internal timelines," he said.

On reviewing the application of two small finance banks for univarsal licence, Malhotra said the RBI has already rejected one application and is processing the rest. "You will see decisions soon, and they will be communicated through press releases," he added. 

Malhotra also acknowledged a visible recalibration in microfinance portfolios due to shifting business strategies. Deputy Governor Swaminathan Janakiraman addressed concern related to microfinance institutions, particularly in the context of their recent business adjustments.

"We have seen a shrinkage in the MFI portfolio due to recalibration," Swaminathan said. He noted that many MFIs are modifying their business models and collection methods in response to changing market conditions. The RBI has been engaging with them through supervisory channels to monitor this process, he said.

He added that some degree of portfolio volatility was natural and the situation should stabilise over the coming quarters. "Going forward, the MFI segment should see more stability, depending on economic conditions and borrower income trends," he said. Swaminathan clarified that there is no regulatory action currently planned for any specific segment. "As the Governor said, there are no new regulatory measures being considered at this point in time".  End

Reported by Sachi Pandey

Edited by Akul Nishant Akhoury

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